23/5/06 (The Star)  -  DISCUSSIONS on Asean's free trade agreement (FTA) with India have run into difficulties over New Delhi's resistance to tariff cuts on a range of products important to the economies of South-East Asia, including commodities such as palm oil.

Nearly a thousand items are still on a “sensitive” or negative list not open to faster liberalisation. 

Congress Party chief Sonia Gandhi has tilted towards the naysayers by writing to Indian Prime Minister Manmohan Singh (whose position is secure only as long as she does not want the job herself or for her son), cautioning him over too ambitious an FTA policy.

The issue of farm imports was specifically mentioned. An Indian official said FTAs “cannot be a buzzword,” and that India realises its profile in South-East Asia cannot be the same as China's.

Too weak politically to push against the tide or stand up to his party boss, the worry is that Manmohan Singh, a respected trade economist, may fail to live up to the promise he made in December that India will be “pragmatic and flexible” in the trade talks.

Several points are at issue here, starting with India's Look East policy. 

A cornerstone of that policy, born partly of a desire to catch up with China's high profile in the region, was closer and rapid economic integration with Asean. It was this that led former prime minister Atal Bihari Vajpayee to offer Asean a trade pact when he attended the Phnom Penh summit in 2002.

This was a year after China and Asean agreed to create a zero-duty market within a decade. Manmohan Singh has to realise that having taken the initiative, India's credibility will be questioned if promises are not fulfilled.

Another issue is India's own economy and the demonstrated gains to it from a more open regime. Merchandise exports as a percentage of gross domestic product have almost doubled since 2002.

Last year, exports rose a faster-than-expected 25%. A negative trade balance persists, yes, but that deficit is nearly erased if one takes into account the billions of dollars earned by software and service companies, as well as the remittances of overseas Indians.

Yet New Delhi's posture in the talks is one of fear and self-doubt, not the confidence one would expect of the world's second-fastest growing economy.

It is time for India to make up its mind about exactly what it expects from its Asean relationship. At the very least, it should realise there cannot be trade without trade-offs. – The Straits Times / Asia News Network